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Jim Hawkins is a young orphan who lives in the Admiral Benbow in England with his best friends Gonzo and Rizzo. Jim listens to the tales of Billy Bones about the pirate Captain Flint, who buried his treasure trove on a remote island and executed his crew so only he would own the island's map. One night, Bones' crewmate Blind Pew arrives, giving Bones the black spot. Bones gives Jim the treasure map and reveals that he had been Flint's first mate. Just before dying of a heart attack, he begs Jim to go after the treasure and keep both it and the map safe from pirate hands. An army of pirates attack the inn, destroying it, but Jim, Gonzo, and Rizzo escape with the map.

The trio takes the map to the half-wit Squire Trelawney (Fozzie Bear), who arranges a voyage to find the treasure. The boys are enlisted aboard the Hispaniola as cabin boys, accompanied by Trelawney, Dr. Livesey (Bunsen Honeydew), and Beaker. The ship is commanded by Captain Abraham Smollett (Kermit the Frog) and his overly strict first mate, Mr. Arrow (Sam Eagle). The boys meet the cook Long John Silver, a one-legged man whom Bones warned them of, but Jim and Silver become good friends. The ship sets sail, but Smollett is suspicious of the crew, believing them to be of shady character. After Gonzo and Rizzo are kidnapped and tortured by three of the crew who have turned out to be pirates, he has the treasure map locked up for safe keeping.

It is revealed that Silver and the secret pirates in the crew had been part of Flint's crew and want the treasure for themselves. Silver fools Mr. Arrow into leaving the ship to test out a rowboat, claims he drowned, and has his minions steal the map during Arrow's memorial service. Jim, Gonzo, and Rizzo discover Silver's treachery and inform Smollett. Arriving at Treasure Island, Smollett orders the entire crew save the officers to go ashore, planning to keep himself and non-pirate crew aboard the ship and abandon the pirates on the island. However, his plan falls through when it is discovered that Silver has kidnapped Jim to have leverage against the captain. On the island, Silver invites Jim to join them in the treasure hunt using his late father's compass. When Jim refuses, Silver forcibly takes the compass from him. Smollett, Gonzo, and Rizzo land on the island in an effort to rescue Jim. However, unbeknownst to them, Silver had hidden a squad of pirates aboard the Hispaniola before leaving, and they capture the ship in Smollett's absence. On the island, Smollett and the rest of the landing party are captured by the native tribe of pigs, where Smollett reunites with his jilted lover Benjamina Gunn (Miss Piggy), the tribe's queen.

The pirates find the cave in which Flint hid the treasure is empty, leading to a brief mutiny against Silver. Silver reveals that, even though he is a pirate, he cares for Jim and allows him to escape. Smollett and Benjamina are captured by Silver, and Smollett is hung from a cliff to fall to his death. In an effort to save Smollett, Benjamina reveals the treasure is hidden in her house, but when she spits out a kiss from Silver, he hangs her off the cliff as well. Jim rescues his friends and with Mr. Arrow (who is revealed to be alive), the group regains control of the Hispaniola, and rescue Smollett and Benjamina. The group engages the pirates in a sword fight until only Silver is left standing, but he surrenders when he finds himself outnumbered. While the pirates are imprisoned, Silver discovers he still has Mr. Arrow's keys and tries to escape with the treasure. Jim confronts him, but allows him to leave as long as they never cross paths again, much to Silver's disappointment. Silver rows away, but not before returning Jim's compass to him. However, Mr. Arrow informs Jim and Smollett that the boat Silver used was not seaworthy, and Silver is stranded on the island with no gold.

With Jim promoted as the ship's new captain, the crew of the Hispaniola sails away into the sunset, while some scuba-diving rats recover the treasure from the sea, ending the film.

Kevin Bishop as Jim Hawkins, a good-natured orphan boy who, for most of his life, has worked at the Admiral Benbow Inn under the strict rule of Mrs. Bluveridge, but has always dreamed of nautical adventures. He is an incredibly trusting boy, which proves to be somewhat of a downfall for him, as he forms a bond with the ship's chef Long John Silver, who is ultimately revealed to be a pirate.

Tim Curry as Long John Silver, a deceptively charming pirate, posing as a chef, who befriends Jim at first until he is overheard by Gonzo, Rizzo and Jim as he reveals his dastardly plans to his fellow pirates aboard the Hispaniola. During his siege on Treasure Island, it is suggested that Silver and Benjamina Gunn share a romantic history. Despite his villainous nature, he genuinely cares about Jim.

Jennifer Saunders as Mrs. Bluveridge, a loud, plump woman who owns the Admiral Benbow Inn where Jim and his friends work. She has an uncanny ability to know when people are not doing what they should be doing, which leads to various characters exclaiming, "How does she do that?!" Though rough with the "boys", she does show a genuine concern for Jim, helping him escape the pirates before seeing them off herself.

Billy Connolly as Billy Bones,[2] an ex-pirate, previously a member of Captain Flint's crew who witnessed the burial of gold on Treasure Island and informs Jim that he still has the map to the treasure before he suffers a fatal heart attack. During a 2002 live performance in Dublin, Connolly jokingly claimed to be the only man to ever die in a Muppet movie.[3]

Frank Oz was unavailable for most of shooting, so fellow Muppet performer Kevin Clash puppeteered his characters, while Oz dubbed the voices in post-production. Oz had already participated in a recorded read-through of the script; Clash used these recordings to help prompt his performances. According to Clash, Oz gave him a brief description of each of his characters prior to shooting. Oz described Miss Piggy as "a truck driver wanting to be a woman", and Fozzie Bear as somebody similar to Jerry Lewis.[citation needed]

On coming up with the idea for the film, co-writer Kirk R. Thatcher stated "There were a whole bunch of ideas out there and I was most keen [on] Treasure Island and a King Arthur story with medival [sic] dragons and knights, in the end we all agreed as a group that Treasure Island was a better story for the Muppets to take on."[4]

On the subject of casting, Thatcher said "The original story I wrote with Jerry was that Gonzo and Rizzo played Jim, they were two characters Jim and Hawkins... [T]here was no human boy and I remember the studio was nervous that they couldn’t hold the emotional heart of the movie, so eventually the human Jim Hawkins was written in, and we cast Gonzo and Rizzo alongside him."[4]

The Muppet Treasure Island: Original Motion Picture Soundtrack features an instrumental score by Hans Zimmer, with additional music by Nick Glennie-Smith, as well as songs written by pop songwriters Barry Mann and Cynthia Weil. The film's ending includes the reggae number "Love Power" performed by Ziggy Marley, which was released as a single and promoted with a music video featuring Marley and some Muppets with dreadlocks.

Muppet Treasure Island opened on February 16, 1996 in 2,070 venues and earned $7,906,689 over the weekend, ranking third at the North American box office behind the second weekend of Broken Arrow and fellow newcomer Happy Gilmore.[6] It ultimately grossed $34,327,391 domestically.[1]

On review aggregatorRotten Tomatoes, the film has an approval rating of 70% based on 23 reviews, with an average rating of 6.2/10. The website's critical consensus reads: "Though less Muppet-centric than the original trilogy, Muppet Treasure Island is an energetic, cheerful take on Robert Louis Stevenson's classic adventure, with typically solid gags."[7]

The first DVD re-release in the U.S. was on June 4, 2002, and was a fullscreen-only version. Other releases of these were in widescreen only format. The DVD release has 3 bonus features added like "Hidden Treasure Commentary", "The Tale of the Story Behind the Tail" and "Treasure Island Sing-Along" (but the menus were in widescreen format).

The Hormel Foods Corporation (the creators of Spam) sued Jim Henson Productions for using the name "Spa'am" for one of the film's tribal pig characters.[9] The judge dismissed their suit on September 22, 1995 after a trial for failure to prove damages, noting, "one might think Hormel would welcome the association with a genuine source of pork."[10] When Spa'am later appeared as a racing boss in Muppet RaceMania, he was credited as "Pig Chief".[citation needed]